I'm managing director of Strategic Communications for FTI Consulting, based in Houston. Prior to joining FTI in 2012, I had a 33 year career in the oil and gas industry, working public policy issues for a number of companies including Shell, Burlington Resources, El Paso Corp., and Coastal States. I've also led numerous industry-wide efforts to address regulatory and legislative issues at the local, state and federal level. From April 2010 through June 2012, David served as the Texas State Lead for America’s Natural Gas Alliance. I attended Texas A&I University and The University of Texas, earning B.A. in accounting.

Correcting Misperceptions About Shale Natural Gas

“There are high hopes that the natural gas extraction technique known [as] hydraulic fracturing, or fracking, will boost the economy and bring the U.S. closer to energy independence, but if the energy industry expects to break new ground and fulfill a growing demand anytime soon, they need to make friends with the people who reside near the drilling rigs.”

So begins a recent Reuters story titled “A Local Obstruction in the Fracking Pipeline”. It’s difficult to imagine any other 60 word sentence ever written that contained more false premises and incorrect assumptions. As such, it is an unfortunately excellent example of the sort of inaccurate reporting about the oil and natural gas industry that takes place in the American media many times every day.

Let’s take the initial thought, that natural gas extraction through hydraulic fracturing “will” – presumably at some point in the future – “boost the economy”. The truth of the matter is that the extraordinary shale gas boom that has taken place over the last decade has already provided a major boost to the nation’s economy, and turned previously moribund parts of the country into marvels of economic development. From Pennsylvania to Ohio to Colorado to Louisiana to Arkansas to Texas, shale natural gas has helped to insulate communities and state economies from the seemingly intractable struggles of the national economy.

How about the second thought, that shale natural gas will – again, presumably at some point in the future – “bring the U.S. closer to energy independence”. Again, this has already happened. The U.S. is already well on its way to a high degree of energy independence, and multiple credible sources – like the U.S. Energy Information Agency (EIA) – are projecting that North America can be independent of overseas sources of oil imports within the coming decade. Already, oil imports into the U.S. have dropped dramatically, from almost 70% just a few years ago to less than 50% today.

So let’s trudge on to the next thought in the sentence at hand, that being “but if the industry expects to break new ground…”. Huh? Beg pardon? Say what? Have the folks at Reuters been sleeping the last 5 years, as the supply situation related to U.S. natural gas has been fundamentally transformed from one of scarcity to one of almost unprecedented abundance?

Look, I worked on the 2003 Natural Gas Supply and Demand study conducted by the National Petroleum Council at the request of the Secretary of Energy. We had a collection of the best and brightest minds on the subject of U.S. natural gas working on that effort for a full year, and issued a report whose findings projected a very tight supply situation and persistent high prices through 2025, continued overseas flight of manufacturing jobs in industries dependent on natural gas as a feedstock, and a rapidly growing Liquified Natural Gas import sector.

In other words, we were wrong about everything. What we’ve seen instead since 2003 is rapid growth in supply, a dramatic drop in price, a return of tens of thousands manufacturing jobs to the U.S. from other nations, and proposals to convert a slew of LNG import facilities to LNG export facilities.

Which leads to the next false assumption in the sentence in question. That would be the one where the author questions the industry’s ability to “fulfill a growing demand anytime soon”. Persistent record natural gas storage levels and a drop in the price of the commodity from $12/mcf in 2008 to the $2-$3 range says all one needs to know about the industry’s ability to meet growing demand. And this has all happened as the natural gas drilling rig count has dropped from a high of about 1600 to around 400 today. Persistent high supply + 75% drop in rig count means there is an incredible amount of excess production capacity in the system, there to rapidly meet any significant increase in demand, in the forseeable future.

The writer concludes this ill-considered sentence with the phrase “they need to make friends with the people who reside near the drilling rigs”. Well, ok, there is a smidgen of a point in there.

While it is true that some who live near drilling operations in parts of the country have become disenchanted with the process, the reality is that, even in controversial areas in the Northeast, surveys consistently show that more folks approve of the industry than those who oppose it. In places like Texas and Louisiana, where the population has been used to the industry being around on a constant basis for many years, the public overwhelmingly approves of the industry and appreciates the economic development it invariably brings along with it.

The truth is that the industry has far more of an image problem with the national news media – like Reuters – and isolated pockets in the large cities of the Northeast and West coast than it does with the population at large.

I would go on to point out some of the myriad other fallacies in this Reuters piece, but when an article starts with a first sentence like this one, what would be the point?

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Natural gas is the future of energy. It is replacing dirty old coal plants, and dangerous expensive nuclear plants. It will fuel cars, vans, buses, locomotives, aircraft, ships, tractors, air conditioners, engines of all kinds. It costs far less. It will help keep us out of more useless wars, where we shed our blood and money. It is used to make many products. It lowers CO2 emissions. Over 3,700 natural gas story links on my free blog. An annotated bibliography of live links, updated daily. The worldwide picture of natural gas. ronwagnersrants . blogspot . com

Ron: Thanks for your comments. Your remark on CO2 emissions is particularly relevant, given the misleading comments by others below. The fact is that the use of more natural gas in the power generation sector is one of the main reasons why the US has been able to lower its carbon emissions to 1992 levels over the last few years. This is far greater reduction than those achieved by any other major industrialized nation, and achieved without being a party to the Kyoto Protocols, and without having to engage in a cap and trade system, or a command and control regulatory regime. It has been purely a function of the marketplace.

I notice you say nothing about the various environmental concerns associated with fracking, I would say that having methane coming through your taps which you are able to ignite and which has the potential to cause some pretty serious adverse health issues is a pretty serious concern for a lot of people. Also, what about the effect on carbon emissions or the potential to increase energy bills rather than lowering them, due to the expense involved in fracking in the first place?

Robin, the sentence in the Reuters article in question did not address environmental concerns; thus, my piece analyzing that sentence didn’t either. There will be plenty of opportunity to discuss environmental issues in future pieces here. Don’t fret.

Robin, any methane from water taps is NOT from fracking. The fracs occur much lower than where the water tables are. That methane in water taps is naturally occuring – would be there whether there was a frac or not. Twisted logic on the economics of gas – so will pass on that.

I think David Blackmon needs to a little more due diligence and not just look at the profit side of natural gas extraction using hydraulic fracturing. What about the costs of storing all of the waste water? Once you mix water with all of those volatile organic compounds or VOC’s, you can never clean those billions of gallons of “produced water” or “flowback”. The pipe casings of the wells only lasts at best 100 years. Who is going to pay for the inspection and clean up? All of this gas will add to global climate change. The burning of this gas is totally unnecessary. He should read the research of Jacobson and Delucchi in the March 2011 of Energy Policy and the Nov 2009 issue of Scientific American. We can convert the planet to renewable energy, with existing technology by 2030. Germany will be at 80 % renewable energy by 2016 as it phases out both nuclear and fossil fuel. Fracking or hydraulic fracturing is too dangerous, too expensive and totally unnecessary for our energy needs. I remember when I was told as a kid that “nuclear power would be too cheap to meter.” We need to look at both sides of equation before pursuing this mad gas rush.

Mr. Blackmon–have they fracked under your house yet, and have you tried to get a mortgage on it? Do you have a water tank in the yard, so something drinkable will come out of your faucets? Do you ever get outside the Beltway? There are millions of people whose very existence you dismiss who are being affected by this unnatural industry’s emissions of pollutants to our water and air–do you care, just a smidge? Do you seriously believe that burning more gas will make global warming less of a problem than it already is?

Mr. Anderson: I’ve never lived a day inside the Beltway. I grew up in South Texas, in the middle of the Eagle Ford Shale region, and have lived my entire life in Texas. I’m a 7th generation Texan, and I plan to live here until I die. It wouldn’t bother me a bit to have a frac job performed beneath my home, or better yet, underneath my family’s farm in Goliad County. Unfortunately, my great-great grandfather obtained land more than 110 years ago that has turned out to be a bit too far East to be in the Eagle Ford play, so I have to still work for a living.

Periodically during those 110+ years, our family has had oil and/or natural gas wells drilled on that land, and no one living on or anywhere nearby that property has ever had a problem with drinking water. The modest income produced by these modest wells has periodically helped my progenitors pay their bills and keep the farm in the family.

I appreciate your salute, but wish it involved more fingers. I also wish your comments had involved more actual information, and far less hyperbole.

If your family has seen donkeyheads pumping oil for 110 years, you should be able to understand that modern recovery technology is not to drill down hundreds of hole into the sponge and the one with the best straw, recover the most. The shale has just been penetrated at hundreds of places, and all pressure and flow are gone, and the reservoir cracked into tiny compartments that blocks all flow. Use the shale – or what is left of it, plug every one of the hundreds of hole that now penetrates it, and inject water to again raise the pressure. Then the gas is lighter, and will come first in the one hole you make on the top. Advanced water separation allows reservoir water to be separated down in the reservoir. Modern drilling allows the reservoir or sponge to be opened horizontally. But one well that is left unplugged destroys this. The recovery rate in the old reservoir were around 5 percent – there is 95 percent of the crude left in the ground. In the North Sea, they achieve 65 percent and aim higher. So, the oil company can expect to recover more than 10 times than what has been recovered so far – in all the 110 years. They can also recover much more – the raised flow through the reservoir allows about 20 times faster. Fracking is very easy really, just take the time to understand technology and foreign inventions.